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Belgium - Democratic Republic of Congo: Entry in Force of First Double Tax Treaty

The double tax treaty between Belgium and the Democratic Republic of Congo (DRC) signed on 23 May 2007 came into force on 24 December 2011, making Belgium the first and, for the moment, only country to be linked by such an agreement with the DRC.

The provisions of the treaty are applicable to:

Withholding taxes concerning income earned or paid as of the 1st of January 2012;

Other taxes raised on income belonging to taxable periods starting on or after the 1st of January 2012.

Main provisions of the new Treaty

Dividends
Dividends paid by resident companies of the DRC to Belgian beneficiaries are subject to:

15% withholding tax when the profits of the distributing company are exempt in DRC according to the Congolese investment legislation and the effective beneficiary holds directly at least 25% of the distributing company’s capital;
10% withholding tax in all other cases.

Dividends paid by Belgian resident companies to beneficiaries resident of the DRC are subject to:
5% withholding tax if the effective beneficiary holds at least 25% of the distributing company’s capital;
10% withholding tax in all other cases.

Interests

Interests related to commercial or bank loans and interests paid to public entities of the other state are totally exempt in the country of the debtor company. Other interests are subject to 10% withholding tax.

Royalties

Both contracting states can apply a maximum withholding tax rate of 10% on royalties paid by resident companies.
Capital gains In principle, capital gains are taxable in the state where the seller is resident. The rule is reversed and taxation is due in the other state when the income is earned from:

- the sale of immovable property situated in the other state;
- the sale of movable property belonging to a permanent establishment situated in the other state;
- the sale of shares of companies which value derives for more than 50% from real estate assets situated in the other state.

Elimination of double taxation
- In the DRC

Elimination of the double taxation shall be provided through the tax credit method. Taxes paid in Belgium by a DRC resident can be deducted from his tax liabilities in the DRC without, however, exceeding the part that the Belgian income represents in the DRC tax liability.

Capital or income earned in Belgium and which is totally exempted in the DRC according to the treaty, can however be taken into account when calculating the tax rate applicable to the remaining capital and income taxable in the DRC.

- In Belgium

Elimination of the double taxation of income and gains other than dividends, interests and royalties shall be provided through the “exemption with progression” method.

Double taxation of dividends shall be eliminated through the exemption method and according to the Belgian participation exemption legislation.

Withholding taxes paid in the DRC on interests and royalties shall give rise to the imputation of a tax credit of the equivalent amount on the taxes due in Belgium on this same income.

- Most-favorite-nation clause

The protocol of the treaty contains a most-favorite-nation clause according which the signature, in the future, of any most favorable treaty with another EU Member State should lead to a decrease of the withholding tax rates currently foreseen in the Belgium-RDC double tax agreement.

For further information, please contact Mr. Pascal Dechamps, at HLB Belgium:

HLB Brussels
Boulevard du Souverain 191 
1160 BRUSSELS

E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Tel: +32 2 737 03 20
Website: http://www.hlb.be/